CHASING CHESAPEAKE How Reuters mined SEC filings in its examina7on of Chesapeake Energy Corp.’s tangled business By Brian Grow, Anna Driver, Joshua Schneyer, John Shiffman and Carrick Mollenkamp
Oct 18, 2014
CHASING CHESAPEAKE How Reuters mined SEC filings in its examina7on of Chesapeake Energy
Corp.’s tangled business
By Brian Grow, Anna Driver, Joshua Schneyer, John Shiffman
and Carrick Mollenkamp
Pursuant to the requirements of the Securi2es Act of 1933, this Registra2on Statement has been signed by the following persons, in the capaci2es and on the date indicated. Signature Capacity Date /S/ AUBREY K. MCCLENDON Aubrey K. McClendon Chief ExecuHve Officer (Principal ExecuHve Officer) of each of Northern Michigan ExploraHon Company, L.L.C. and Winter Moon Energy Company, L.L.C. and Director of LA Land AcquisiHon CorporaHon, the Sole Member of each of Northern Michigan ExploraHon Company, L.L.C. and Winter Moon Energy Company, L.L.C. February 8, 2011
Post-‐EffecHve Amendment No. 1 To Form S-‐3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Chesapeake Energy Corpora2on*
February 8, 2011
EXPLANATORY NOTE This Registra2on Statement on Form S-‐3 (Registra2on No. 333-‐168509) of Chesapeake Energy Corpora2on (the “Company”) and its subsidiary guarantor registrants (the “Registra2on Statement”) is being amended to (i) add Chesapeake E&P Holding CorporaHon, Chesapeake VRT, L.L.C., EMLP, L.L.C., Empress, L.L.C., LA Land AcquisiHon CorporaHon, Northern Michigan ExploraHon Company, L.L.C., and Winter Moon Energy Company, L.L.C., all subsidiaries of the Company, as co-‐registrants that are, or may poten2ally be, guarantors of some or all of the debt securi2es with respect to which offers and sales are registered under this Registra2on Statement
TEXT OF CHESAPEAKE EMAIL Sender: Chesapeake Execu2ve Recipient: Chesapeake Execu2ve Subject: Michigan En2ty Date: July 13, 2010 Fyi – Northern Michigan ExploraNon Company, LLC was the buyer on the O.I.L. Energy deal. I do not see this company in our subsidiary list. Should I use Co. 337 in the meanNme?
Winter Moon (Co. 142) was the buyer on the MarqueZe ExploraNon deal.
Item 8.01. Other Events. On February 21, 2011, Chesapeake Explora2on, L.L.C. ("CELLC"), a wholly owned subsidiary of Chesapeake Energy Corpora2on (the "Company"), entered into a Purchase and Sale Agreement (the "Purchase Agreement") with BHP Billiton Petroleum (North America 1) LLC ("BHP"), a wholly owned subsidiary of BHP Billiton Limited, pursuant to which BHP agreed to purchase the Company's interests in approximately 487,000 net acres of leasehold, producing natural gas proper2es and related assets in the Fayebeville Shale play in central Arkansas (the "Divested Proper2es") for approximately $4.75 billion. ……. Chesapeake Investments, an Oklahoma Limited Partnership, Larchmont Resources, L.L.C. and Jamestown Resources, L.L.C., which are affiliates of Aubrey K. McClendon, the Company's Chief ExecuHve Officer and Chairman, are also parHes to the Purchase Agreement. Such par2es own a working interest in a por2on of the developed producing proper2es included in the Divested Proper2es which were acquired through par2cipa2on in drilling pursuant to the Company's Founder Well Par2cipa2on Program. The interest owned by such en22es will be conveyed to BHP in the transac2on at the same price and on the same terms and condi2ons as those that apply to CELLC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 8-‐K, Feb. 21, 2011
Reuters Exclusive: Chesapeake CEO McClendon cashes in on well deals
By Anna Driver HOUSTON | Mon Aug 15, 2011 1:25pm EDT (Reuters) - Chesapeake Energy Corp Chief Executive Aubrey McClendon is legendary on Wall Street for his dealmaking prowess, but investors may not realize the deals put money directly into his pocket.
THE HUNCH
• Could Chesapeake be using its vast assortment of LLCs to keep debt off the balance sheet?
• Could McClendon, through his LLCs, be helping?
• Could Chesapeake be the next Enron?
2011 CHESAPEAKE PROXY
2011 CHESAPEAKE PROXY
Engineering Support. Mr. McClendon receives support services from certain of the Company’s reservoir engineering staff who provide reserve data and analysis related to personal financing transactions entered into by Mr. McClendon with respect to certain of his interests in the Company’s wells acquired under the FWPP (such program is described under “Transactions with Related Persons—Founder Well Participation Program” on page 60).
Mr. McClendon participates in the FWPP through entities in which all equity interests are owned solely by Mr. McClendon and his immediate family members as approved by the Compensation Committee in accordance with the FWPP.
Mr. McClendon’s interests are his personal assets and the FWPP does not restrict sales, other dispositions or financing transactions involving FWPP interests previously acquired from the Company.
QUOTE FROM VETERAN WALL STREET ANALYST
“If they are showing that kind of nega2ve cash flow, the wells don’t have value,” said Phil Weiss, oil analyst at Argus Research who has a sell ra2ng on the company’s shares. But given that McClendon has borrowed more than $1 billion based on the value of his well stakes, “I really don’t think (the company’s disclosures) tell me much,” Weiss said.
THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective January 1, 2004, between CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation (the “Company”), and AUBREY K. McCLENDON, an individual (the “Executive”).
3. Other Activities. Except for the activities (the “Permitted Activities”) expressly permitted by paragraphs 3.1 and 3.2 of this Agreement or approved by the board of directors of the Company, the Executive will not: (a) engage in business independent of the Executive’s employment by the Company which requires any substantial portion of the Executive’s time; (b) serve as an officer or director of any public corporation, partnership, company, or firm; (c) except for passive investments that do not violate this Agreement and require only a minimal portion of the Executive’s time, serve as a general partner or member of any corporation, partnership, company or firm; or (d) directly or indirectly invest in, participate in or acquire an interest in any oil and gas business, including, without limitation, (i) producing oil and gas, (ii) drilling, owning or operating oil and gas leases or wells, (iii) providing services or materials to the oil and gas industry, (iv) marketing or refining oil or gas, or (v) owning any interest in any corporation, partnership, company or entity which conducts any of the foregoing activities.
THE LAVISH AND LEVERAGED LIFE OF AUBREY MCCLENDON (REUTERS) -‐-‐ OKLAHOMA CITY, June 7 , 2012 In an annex at the headquarters of Chesapeake Energy Corp, a unit informally known as AKM Opera2ons manages a top company priority: the personal business of its namesake, Chief Execu2ve Aubrey K. McClendon. According to internal documents reviewed by Reuters, the unit’s accountants, engineers and supervisors handled about $3 million of personal work for McClendon in 2010 alone. Among other tasks, the unit’s controller once helped coordinate the repair of a McClendon house that was damaged by hailstones.
2011 CHESAPEAKE PROXY For safety, security and efficiency, the Company provides Mr. McClendon with the use of fractionally-owned company aircraft. The Company also provides Mr. McClendon with certain home security services due to the high profile nature of his position. Additionally, the Company provides Mr. McClendon with accounting and engineering support services to enable him to focus on the variety of critical and complex issues that currently face the U.S. natural gas and oil industry while remaining actively involved in the oversight of the day-to-day management of the Company.
2011 CHESAPEAKE PROXY, CONT.
(c) This column represents the value of other benefits provided to the NEOs, other than Mr. McClendon, including compressed natural gas retrofitting for personally purchased vehicles and monthly country club dues. Also reflected are amounts for supplemental life insurance premiums for all NEOs and, other than Mr. McClendon and Mr. Rowland, amounts for financial advisory services. The amounts reported in this column for Mr. McClendon in 2010 include (i) $250,000 for the costs related to personal accounting support provided to Mr. McClendon by our employees, net of reimbursement, and (ii) $119,135 for personal security provided to Mr. McClendon and his family.
Antitrust Investigation. On June 29, 2012, Chesapeake received a subpoena duces tecum from the Antitrust Division, Midwest Field Office of the U.S. Department of Justice. The subpoena requires the Company to produce certain documents before a grand jury in the Western District of Michigan, which is conducting an investigation into possible violations of antitrust laws in connection with the purchase and lease of oil and gas rights. The Company has also received demands for documents and information from state governmental agencies in connection with other investigations relating to the Company’s purchase and lease of oil and gas rights. Chesapeake intends to provide information in response to these investigations, and its Board of Directors is conducting an internal review of the matter.
WHAT DOES THE LANGUAGE IN THE SEC STATEMENT ABOUT
“ANTITRUST INVESTIGATIONS” TELL YOU?
TAKE-‐AWAYS • SEC FILINGS OFTEN PROVIDE THE MINIMUM AMOUNT OF INFORMATION REQUIRED
• IN MORE RARE CASES, SEC FILINGS CAN BE INTENTIONALLY MISLEADING
• REVIEW SKEPTICALLY, ASSESS WHAT’S MISSING – REASON FOR A PERK? NAME OF A COMPANY? DEFINITION OF A TERM LIKE “FINANCING”?
• CONSIDER – WHERE CAN I GO TO FIND MISSING DATA INDEPENDENTLY? WHAT DATABASES, SOURCES?
• CORROBORATE AND REQUEST COMMENT